An Interesting Data Point on Sea Org Headcount and Revenue

Sea Org executives back in the good ol’ (or at least more numerous) days. Why do their hats look just a bit too large for their heads, in yet another parallel to the North Korean military?

In a video posted Sunday on Tony Ortega’s site, recently escaped Sea Org member Jillian Schlesinger talked about her time in the cult. Jillian related several data points that are of interest, including David Miscavige’s claim that RTC is reaping $75 million per year in revenue from Flag in Clearwater.

Here, we look at a few of the things Jillian said, and we look at what this might mean for the cult. Throughout, I share some analytical techniques I’m using to evaluate some of the things Jillian said when they either confirm or contradict my current best guesses. These thoughts may help you to do a better job in your own analysis.

Perhaps the most interesting quote from Jillian’s video was something Scientology leader David Miscavige said to the assembled Sea Org troops in LA:

There was an analysis done some months ago, probably about six months ago now. And he [David Miscavige] had revealed that in Florida, there’s about 2,000 Sea Org members, and they send up $1.5 million a week to him. Then, looking in all of LA, there’s about 2,000 Sea Org members, and they were not sending up that much to him every week. So, he wanted a huge rearrangement of staff, and then to make a, in-house, out-of-Sea-Org-member, construction unit, so that we could save money doing it ourselves, even though we have no training in construction, and then we don’t have to hire anyone. And then I was doing that for about the last six months.

How Many Sea Org Are There, Really?

This quote from COB is interesting in two respects. First, of course, Miscavige is saying that there are at least 4,000 Sea Org members in the US, approximately evenly distributed on both coasts. And he’s claiming that he’s getting $75 million per year from Flag and a lesser amount from the Western US. My estimates are that the real number from Flag is closer to $30 million per year these days, perhaps a bit less, and that they’re probably getting $10 million from the higher level orgs on the West Coast (it’s not an international destination for people coming in for advanced training like Flag is). And based on some correspondence late last year with a couple Anons in the Clearwater area, it appears that some of the cult-owned apartment buildings used to house Flag workers are sitting empty.

So how does a careful analyst think about the disparity between previous estimates and the new data point? This is one of the trickier analytical traps: it’s dangerous to discount new information when it doesn’t fit your biases, but it’s equally dangerous to believe implicitly that a newer data point means your prior thinking is wrong. If the new information is correct, it would mean that my estimates of about $180 million in cult revenue in 2013 were low by an integer multiple — the cult could have been raking in $400 or $500 million a year; that’s a major error. Intellectual honesty, essential for a good analyst, means we have to look at a surprising new data point with a willingness to consider honestly the possibility that we’re way off in our numbers.

The first thing to do in teasing apart this information is to consider the credibility of the source. It’s probably reasonable to believe that someone emerging from the Sea Org only a couple weeks ago and re-adjusting to reality is not going to have the spare time to fabricate a story like this out of whole cloth. It is thus reasonable to believe she’s recounting accurately what she heard. The question then becomes whether Miscavige’s numbers are credible.

First Cross-Check: Direct Observation

In looking at the claim of 4,000 Sea Org members, it’s important to cross-check this against other data that we have. In evaluating the number of Sea Org members in LA, let’s start with easily observable data points. One such is the level of foot traffic at L. Ron Hubbard Way in LA. A recent afternoon stroll down the sacred street showed only two people (one a security guard), in front of the building, and two RPF girls on the back side on Catalina St. No Sea Org was visible. The parking lot, which holds approximately 200 cars (I counted from the aerial Google Maps view) was only slightly more than half full; even assuming that few Sea Org have cars, that’s a pretty light occupancy load. These observations are enough to raise suspicions about Miscavige’s credibility, but they’re not conclusive: given the tight constraints on their work schedules, it’s reasonable to expect that one wouldn’t see too many of the Sea Org types out on the sidewalk during nose-to-the-grindstone hours.

Second Cross-Check: Independent Rules of Thumb

The next step is to cross check the claim against another independent metric, one that has nothing to do with the first set of observations. In other words, you want to look at an independent measure. It’s often useful to consider real estate square foot per staff member. I would estimate that the 11 floors (+/-) of the original Big Blue building total about 125,000 square feet, and the rest of the complex is similar sized — call it 250,000 feet total. While I haven’t done a complete count of the rest of the cult properties in the area, let’s assume another 100,000 square feet. Let’s then assume that the hypothetical 2,000 Sea Org members are joined by about 1,000 other staff.

If you do the math, that implies there are about 120 square feet of facilities per person, slightly larger than a 10 by 10 foot office. But that’s quite a bit lower than conventional estimates of office space per capita, which is currently typically about 250 square feet per employee. That’s including conference room facilities, restrooms, and all sorts of other stuff. Incidentally, various commercial real estate trade groups suggest this number is shrinking rapidly due to “hoteling” (unassigned cubicles shared by multiple workers) due to the rise of telecommuting, a trend that the cult is unlikely to embrace. I thus am sticking with the 250 square foot number for the foreseeable future even if the overall trend in real estate is expected to drop sharply.

It’s also worth noting that within the original Big Blue building, the floor plate of a 1930s edifice is substantially less efficient than a modern skyscraper, so the percentage of each floor plate devoted to “core” functions like elevators, plumbing, janitorial, restrooms, etc. is a much higher percentage of the space on a given floor in a building of that age than in something more modern. By the way, that explains why the Empire State Building in New York is a great landmark but a terrible office building — the ratio of rentable space on each floor is too low for it to compete against modern buildings. So in the case of the Big Blue complex, the 250 square foot per person number could actually be low when you measure the gross square footage of the complex (that’s what you measure when you measure the outside dimensions of the building).

Note that in these estimates, we’re not subtracting out square footage for delivering services, places where employees wouldn’t normally be stationed. So we’re not deducting square footage for course rooms at AOLA, for the L. Ron Hubbard life exhibit, for the Psychiatry: Industry of Death exhibit, etc. Again, we’re being “conservative” (using assumptions that are least favorable to our argument).

Using the 250 square feet per employee and dividing that into total square feet, we get about 1,300 employees in Hollywood. Adjusting for regular staff versus Sea Org, we get to about 600-800 Sea Org in Hollywood. So Miscavige is lying by a factor of about 2.5x to 3.5x what we believe is observable. That, too, is consistent (perhaps even on the low side) of the “Miscavige Reality Distortion Ratio” that we’ve often seen from the cult’s “fearless leader.”

And The Same General Principle Holds True in Clearwater…

To cross-check the 2,000 claimed Sea Org in Clearwater, we’ll use a similar process. Those of you who are denizens of the greater Tampa Bay area and who have better visibility into the real estate holdings of the cult at Flag could help list and then nail down the use of the various buildings, to help me develop an understanding of how much space is customer-related (i.e., non-office), how much is office-related, and how much is guest accommodations. Yes, that’s a pretty subtle, but definitely impassioned plea for any hard data points that you have.

The diversity of real estate holdings in Clearwater makes the process of getting credible staff counts a bit harder, though it is still ultimately possible to get accurate numbers. Until we’re able to list all the properties and figure out how much square footage is in each, then categorize them as office, hotel or customer spaces, we’ll try to use metrics other than the total square footage of all the downtown Clearwater buildings.

At this point, the most useful observation came from an e-mail conversation I had with a former member and current Anon in the area, who sent a preliminary listing of properties including apartments, and who pointed out that a number of the buildings are actually empty at this point. While I can’t find the exact notes at the moment (ah, the joys of restarting a blog after a hiatus), I am going to guess that staff levels are substantially below peak levels, with perhaps less than half the cult-owned units occupied by staff. Incidentally, it’s entirely possible that the cult over-bought apartment space a few years back, above even staffing levels at the time, so it’s not wise to try to estimate current staffing based on the number of total units.

Perhaps the best check of staff size at Flag will now boil down to the capacity of the staff dining room in the basement of the Super Power building. The total permitted floor space of the building is 377,000 on eight floors (including the basement), so we’ll assume a floor plate of 50,000 square feet. I have some feelers out for more data about the layout of the basement, but if you subtract out machinery spaces, storage, etc., then it is reasonably likely that no more than half of the basement floor plate will be devoted to the staff dining room. Typically, in a restaurant, about 40% to 50% of the square footage is devoted to the kitchen, and the rest to the dining room. One rule of thumb suggests allocating about 20 square feet per customer. If we thus assume that the total dining space is 25,000 square feet, then a dining room of 12,500 square feet will hold about 600 staff. Then if we further assume that they have two meal services per meal (easily done given the staff’s regimented lives), then we could believe there are about 1,200 staff at Flag. But I would not expect hotel staff to have to eat in the staff dining room, so we could add another 300 staff to that number and get about 1,500 total staff in Clearwater. That cross-checks reasonably well with a quick back-of-the-envelope estimate of the capacity of the occupied apartments. And again, assuming that at most 2/3 of staff in Clearwater are Sea Org, then we get to about 800 Sea Org at Flag.

The Other Guys are Sending Me $75 Million a Year; What’s Wrong With You Morons?

The second part of Miscavige’s assertion is that he’s pulling $75 million out of Flag per year. The quote is worded to say that “they send $1.5 million a week up to him.” In other words, that’s the contribution to Int Management and thus to the Sea Org reserves. Let’s assume that Flag is sending about 75% of their revenue uplines. That implies that the cult is pulling in $2 million a week in gross revenue, about $100 million per year. How credible is this?

First Cross-Check: No Decline in Flag Revenues in Ten Years? Seriously?

There are a couple of ways to cross-check this. First, there’s a common sense metric. Mat Pesch once commented, either in an article on Mike Rinder’s blog, Marty Rathbun’s blog or on Tony Ortega’s site, that when he was in ten years ago, Flag was pulling in about $2 million a week. Mat was a finance guy at Flag and has been credible in his description of life in the cult, so we’ll believe that the numbers he gave are accurate. Miscavige is thus claiming that revenue has remained consistent with the decade-ago level. Given all that has happened in the cult, this is ludicrous on its face. In other words, the bullshit alarm is ringing loudly. But simply sounding the bullshit alarm isn’t sufficient; we need to look at a couple of other metrics to try and understand what’s really going on in order to demolish this claim convincingly.

Second Cross-Check: Flag Revenue Per Potential Customer

Second, an upper bound of Flag revenue could come from an estimate of per-capita spending from each active member. My current estimate is that there are 20,000 active public Scientologists. I believe about 4,000 of those are from countries with relatively low per capita income (Russia, Taiwan, etc.) where travel to Flag on any sort of regular basis is not likely to be affordable. As a result, I believe the total market for Flag services is about 16,000 active cult members.

But it’s important to realize that likely overstates the actual addressable market for Flag services. An addressable market is one with proven potential, not just the theoretical upper maximum. The total market for cars is everyone who currently owns a car, plus the number of people who will get a driver’s license, minus those who will be too old to drive further. But the real addressable market for cars are some percentage of those whose leased cars whose leases are up, the number of people whose cars will be totaled in accidents, plus other populations — a far cry from the total number of drivers.

In considering the addressable market of Flag customers, I’m intrigued by the recent interviews I’ve had with ex members. Consistently, these folks said that they had done everything possible to avoid going to Flag, since they were quite clear that they would be hit up endlessly for donations, and that they would be trapped there for far longer than they intended to stay. They all pointed out that the pressure to donate when one stayed at Flag had consistently grown worse in their often decades-long experience in the Church. None had been to Flag in the last ten years before they walked away from the cult. In other words, they had all managed to avoid the clutches of the FSO reg’s.

Additionally, I believe Europeans are less likely to jump on a plane to come to Flag, partly because of the cost and hassles of much longer flights, but also because of the declasse nature of Clearwater — why go there when you can get many services at a stately English manor home (Saint Hill)?

It’s probably also necessary to cut out second generation members in their early 20s who are on their own, who don’t have the economic firepower to afford two weeks at the Fort Harrison Hotel and all the services.

Finally, one must estimate one of the most productive markets for Flag services: the customers “on the level” (i.e., doing OT VII), who are required to come in for sec checks every six months. At this point, there are probably less than 500 Scientologists actually on the level.

I thus believe that the actual addressable market for Flag services is no more than 7,000 people (excluding OT VII sec checkers). $100 million divided by 700 people gets you to about $15,000 per person per year, for every single person in the addressable market in every single year, whether or not all of those potential customers actually do come to Flag. That seems extremely high, though it is not inconceivable.

Importantly, it may have been possible to get $15,000 per Flag visit out of the average Flag visitor in years past if they were doing multiple intensives with Class XII auditors at $1,000 per hour. But that is probably more the exception than the rule these days: you have to take into effect the effects of the Golden Age of Tech Phase II (GAT 2) announcement. Remember that GAT 2 is requiring many people to redo lower-level course work, and that the promise of GAT 2 is that you’ll get through all that low-level nonsense so much faster than ever before. We’ll ignore the opportunity for assorted (and obvious) hilarity when contemplating the joy people will feel from screwing up their brains learning Study Tech in the “Student Hat” course for the fourth time. What’s important is that the per-hour revenue for getting people to come to Flag to do these low-level course is likely to be significantly smaller than the per-hour revenue from Class XII auditing intensives in the past. And that suggests strongly that the Flag business is off from levels a decade ago, where the cult had a much larger addressable market (perhaps 40,000 total public worldwide in 2000 versus the current 20,000, and almost all from high-GDP economies back then). The mix shift away from high-margin services and thus much higher per-hour revenue to lower margin low-level services must inevitably mean that revenue is down.

It’s possible that total Flag revenue is as high as $50 million, a little higher than I had previously been estimating. I had estimated that all services-related revenue including Flag was about $60 million, but the revenue from the Orgs may actually turn out, based on recent document dumps from Mike Rinder, to be less than the $20 million I had estimated.

Third Cross-Check: Revenue Per Employee at Flag

If we believe the overall cult revenue number of $180 million is reasonably close, and we believe that the cult has about 5,000 total staff, then we quickly compute an average revenue per employee of $36,000 per year. If we assume that the cult has efficiently distributed staff across the organization (a laughable assumption, but bear with me), then if we take cult-wide revenue per employee of $36,000 and divide our estimated $50 million per year in Flag revenue by that figure, we get about 1,400 employees who should be involved in generating that much revenue. That’s not terribly far off our estimate of about 1,600 total staff at Flag.

The point of this excercise is not that this calculation proves our estimates of either Flag revenue or of the number of staff at Flag. It does, however, show that there aren’t obvious contradictions in our model. If we had estimated 2,000 staff and $100 million in Flag revenue, that would imply revenue per employee of $50,000, substantially above the cult-wide estimate, and that’s particularly suspect in the case of Flag since many of those employees are in hotel and restaurant guest services, producing much lower-margin revenue than high per-hour revenue employees like auditors and reg’s. In other words, our current model sanity checks reasonably well.

If They’re So Rich, How Come They Have to Do Their Own Construction?

The second interesting aspect of this is that, despite the claim of taking $75 million per year out of Flag in Clearwater, and a lesser amount on the West Coast, the cult is still so expense-starved that they have to turn some appreciable fraction of Sea Org into a construction brigade to save money on construction.

There is no particular reason to disbelieve Jillian in this story, since there are plenty of accounts of waves of staff being demoted to the RPF when Big Blue needed renovations before, then mysteriously finding that they completed the RPF program soon after renovations were finished.

However, the fact that the cult is now using Sea Org staffers for construction duty suggests either low manpower utilization on useful tasks for the Sea Org, making it attractive to pull them to other tasks, or a cash crunch that would make deploying them on renovations important to avoid extra expenses.

Most businesses are somewhat rational in their decision-making process, deploying labor where it is best used either to generate revenue or to avoid costs (i.e., paying internal slave labor only a fraction of what outside experts would cost). But it seems unwise to believe that the cult would be rational in deciding to deploy slave labor to avoid expenses, given that David Miscavige seems to make many decisions to enjoy arbitrary control over the lives of staff, rather than from economically valid principles. The detail that Jillian was detailed along with another girl to remove Fiberglas insulation from ceiling crawl spaces in Las Vegas, rather than participating in a large-scale construction project at Big Blue suggests that the motivation for creating this construction brigade is unclear — a small project like might not necessarily have been undertaken for economic reasons, but just as a way for Miscavige to throw his organizational weight around.

When I started considering the apparent contradiction between Miscavige’s inflated claims of staff size and revenue at Flag versus the apparent need to save money on construction, I was hoping to be able to quantify this, but I’m not entirely certain about the financial aspects of this construction project. Anyone with any detailed perspective on recent construction efforts in Hollywood could help greatly in teasing out relevance, if any, of this detail.

The Russians Are Coming, The Russians Are Coming

Poster for the 1966 comedy classic

Jillian’s assertion that 80% of Sea Org at Flag are Russians is quite interesting. There had been numerous reports that employees are increasingly non-native English speakers, and Eastern European origin for many of the staff was frequently mentioned, though Latin Americans are also a large part of the mix. But the assertion that 80% of all Sea Org in Clearwater are Russians is a bit surprising.

Some discussions on WhyWeProtest suggest that these Russians are not all Russian nationals, but may be Moldovans and Russian speakers from Eastern European countries whose economies are in even worse shape than that of Mother Russia. Interestingly, the economic situation in Russia is not all that good; I’ve read surveys that suggest that almost half of young Russian citizens want to emigrate to the West. It’s not hard to believe that the situation is even worse in small satellite countries like Moldova or its breakaway Transdnistria region. That certainly suggests that the cult has access to a pool of desperate recruits.

While it certainly cross-checks with already known facts that many Eastern Europeans are being sucked into the cult’s slave labor pool, it’s not clear that the number has reached 80%. For that to have happened, there would have had to have been massive expansion of the size of the Sea Org. There’s no evidence that there has been any such expansion, either in anecdotal checks in the activity levels at Pac Base or Flag, or in other stories from recent defectors. Economically, given the low cost of Sea Org labor (I suggested the fully loaded cost of a Sea Org staffer is probably about $500 per month), the cult could potentially expand the size of the labor pool “just because” without wrecking finances. However, I am not sure the cult would do this just to feed Miscavige’s need to keep up appearances — adding 500 staff would cost at least $3 million per year, difficult to justify in a time where revenue is likely declining faster than the rate seen in previous years.

If massive expansion of the Sea Org was not the driver behind a sharp rise in the percentage of Russian-speakers in the mix, then the only other possible explanation is a significant wave of replacement of existing Sea Org members. Again, there’s not any real evidence that this is taking place.

I would thus treat the 80% number with some skepticism, as if it is a quick eyeball guess or a number relayed through a number of intermediaries before it got to Jillian. It may be that 80% of new Sea Org recruits literally are Russian speakers, though the total number of Russian speakers in the Sea Org remains quite a bit lower.

If 80% of new Sea Org are Russian speakers, that would speak to the increasing difficulty of using the kids of existing members as Sea Org recruits. That, in turn, suggests that the potential to use the threat of disconnection from a kid in the Sea Org to keep doubting parents in line is losing its impact. And remember, the parents of Sea Org members are presumably the more loyal of the older generation of Scientologists, and if a key retention tool to keep them enmeshed in the cult is losing its effectiveness, then further declines in membership in the short to medium term are inevitable.

Any further data points on the nationalities of arriving Sea Org members would be extremely helpful.

Emerging Trends to Watch

Eric Falkow joins staff… at age 79!

Given the struggles the cult has in retaining staff, we’re always interested in looking at emerging trends in where they’re finding new employees. This is why the influx of Russian speakers into Flag is important to monitor closely and to quantify more closely.

But in the last two weeks’ “Sunday Funnies” stories, Tony Ortega’s blog has featured older cult members going onto staff, the first time I can recall seeing something. Once is a curiosity, twice is a coincidence and three times might just be a trend worth considering.

Yesterday’s column featured the above ad, proudly announcing that Eric Falkow has joined the staff of the Pasadena Ideal Org. According to one database I use, there is a 79-year old named Eric Falkow living in Pasadena; it’s reasonable to conclude that they’re the same person.

If we see any more older members joining staff, that could be evidence of yet another desperation strategy in trying to fill the rolls. This and similar evidence of difficulty recruiting new staff leads to the scenario I’ll detail in a blog post later this week: can the cult continue to operate if the number of employees at local orgs shrinks beyond some minimal level?

Author: John P.

John P. is a Wall Street money manager and IT technologist fascinated by irrationality in all its forms, and Scientology most of all. He's a lifelong Steely Dan fan.
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